Is Social Capital Actually Capital? Thoughts on the Theory of Social Rent

The article contains the conceptual analysis of the social capital theory. It reveals that most interpretations of the “social capital” phenomenon do not reflect the classical and contemporary notions of capital in economics. This leads to a confusion of concepts. Today, social capital is described as social norms, values, and connections. Economists theorize about the positive influence of these phenomena. However, this article reveals that, as a rule, the behavior of social actors cannot be described as a rational investment process. More often than not, individuals’ decisions are governed by principles other than the desire to make a profit or fulfill egocentric needs. We believe that the positive impact on economics that researchers speculate about is merely a byproduct of day-to-day social activity. This prompts a conclusion that it would be incorrect to refer to certain social phenomena as “capital”. This article attempts to bring some clarity into the matter. In our view, social capital is the return on investment. Individuals invest in social connections, hoping to profit from them in the future. That said, in most cases it is difficult to distinguish social capital investments from actions that are guided by other motives, such as love, loyalty, or empathy. We believe that some social phenomena (for instance, fatherly love, etc.) cannot be referred to as “capital” for purely ethical reasons. In this context, our research shows that some versions of the social capital theory are best described through the prism of the economic rent theory. In classical economics, the term “rent” refers to the benefits that individuals receive from sources other than labor or capital. In a way, it could be described as a “gift of nature”. After all, it is hardly surprising that the rent theory initially started out as the study of land rent: the labor and capital investments being equal, different plots of land can provide different yield. When reviewing social phenomena, we propose a new interpretation of the so-called “social rent”. We believe the social rent is determined by a favorable social environment. A given individual may be born in a comfortable environment, or they may befriend someone without thinking that this friendship could potentially be beneficial. In addition, social rent is frequently determined by the specific features of social structure (trust, social norms and values, etc.). In our opinion, the reason why certain forms of social rent are relevant is their connection to everyday social interactions. All of this means that research on the matter needs a more careful approach, with a more skeptical attitude towards individuals as economic actors and a greater emphasis on individuals as social actors.

investments, social capital, social rent, social connections.